Credit Life Insurance (creditor Life Insurance)
Definition of "Credit life insurance (creditor life insurance)"
Insurance issued to a creditor (lender) to cover the life of a debtor (borrower) for an outstanding loan. If the debtor dies prior to repayment of the debt, the policy will pay off the balance of the amount outstanding. Credit life insurance is sold on a group or individual basis, and usually is purchased to cover small loans of short duration. When issued under a group policy, a certificate is issued to the debtor, the master policy being issued by the creditor. The face value of a credit life insurance policy decreases in proportion to the reduction in the loan amount until both equal zero.
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Model state law of the NAIC that stipulates that the purchaser (debtor) of a credit life insurance (creditor life insurance) policy must be provided a descriptive policy; the policy must ...
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